Drought and other setbacks a special area for investors

After-shower rainbows, in myth, end with pots of gold, but droughts can have their rewards, too. Somebody, somewhere, is making money off the acute dry spells that have hit many parts of the United States in the past few years, says Johm R. Groome, research director for United States Trust Company of New York.

In Nebraska, for imstance, the stock of anirrigation equipment company known as Valmomt more tham tripledm in price last year, in large part because of a lack of rainfall for farms.

"In recent momths, our complacency and cavalier attitude toward another resource water -has been soundly shaken," the New York stock analyst says. Current droughts, he adds, have received little notice on Wall Street.

The consequences of disasters and negative trends require solutions, and the strategy for many investors is pinpointing compamies that take advantage of the opportunities.

In Chinese, crisis means "dangerous opportunity," and investments im drought-related companies can be risky. Other factors may beset the company's prospects. But Mr. Groome says that "water stocks" may someday be combined into a group of investments equally as strong as energy-related stocks today.

Underground water tables, especially in the Midwest and West, are receding, and a drought scare on the East Coast in recent months has weather experts wondering if a long-term shortage is on the way. This sum mer's precipitation will be important for the future of the nation's water use patterns.

Water diversiom projects have been pushed as far as they can go, says Mr. Groome, who emphasizes investments im conservatiom technologies. In California, for instance, a state tax credit is given to people who install plastic bubble covers over their swimining pools. The covers, supplied by a company called Sealed Air, reduce evaporation.

Industry, being a major water user, needs more and more chemicals to keep recycled water pure. Such companies as Dow Chemical, Great Lakes Chemical, Betz Laboratories, Nalco Chemical, and Du Pont supply those chemicals.

In addition, the increasimg need to filter "dirty" water for consumptiom involves the products and processes of companies like Pall, Millipore, AMF, and Zurn.

In the West, as in many other parts of the world such as Saudi Arabia, demand for desalimation of salt-laden or brackish water could affect the earnings of compamies now selling or experimenting with this expensive treatment. These include Ionics, the Calgon division of Merck, the Culligan division of Beatrice, and the Aquachem divisiom of CocaCola.

Drought-resistant seeds are being developed by Pioneer Hi-Bred, Dekalb Ag Search, and others. Mr. Groome, alomg wlth some of his colleagues at United States Trust, believe do-it-yourself lawm care products, such as Lowe's, may become more popular in drought-struck areas.

In agriculture, short-term droughts reduce crop-yields and usually raise mamy farmers' income. Mr. Groome notes that the extra income most oftem goes into new farm equipment, boosting sales for firms such as Deere and Allis-Chalmers.

One conservation step for many communities is updatimg or installimg water meters. The Neptune division of Wheelabrator-Frye is a leader im this field. Other new hardware, such as pumps and boilers, is being developed by several companies to help cut back water usage.

"Recyclimg of water industry is becoming of even greater importance, not only to conserve this resource, but also as am energy saver, " Mr. Groome says.

The investment firm's problems-beget-solutions approach also leads to another line of interest: America's lagging productivity in both factories amd offices.

Labor-saving devices that enhance corporate efficiency will be in ever-imcreasing demand. These include:

"Smart robots" -Cincinnati Milacron, Unimation of Condec Corporatiom. Moog, Nordson, Production Automation, Automatix.

Genetic engineering -Cetus. Genex, Biogen, Genemtech, Lilly, Merck, Upjohn.

Laser technology -Spectra-Physics, Coherent, Control Laser.

Computer-aided design and manufacturing -Computervision, Auto-Trol, Applicon, Gerber Scientific.

Fiber-optic components -AT&T, Harris, Corning Glass, and M/A Com.

Electronic voice synthesis and recognition -no real leader yet.

Since poor productivity contributes to higher prices, Mr. Groome says, "those companies which can be categorized as inflation fighters will do well im the years ahead."

After a gloomy 21/2 weeks, stocks revived Friday, pepped up by the hope that interestrates had peaked or nearly peaked. The Dow Jones industrial average reached 1,024.05 on April 27 and then slumped as interest rates soared. But om Friday the Federal Reserve System announced a smaller than anticipated increase im the nation's basic money supply. making it less likely that the Fed would once more allow interest rates to rise. That same day the industrial average rose 12.88 points in a healthy rally, to 985.95, up 9.55 for the week.

Volume on the New York Stock Exchange was 208,801,120 for the week, down fro m 221,212,570 the previous week.